Aug 29, 2022
Mark Stiving is a widely recognized pricing expert and marketing pro who teaches companies how to boost revenues and realize their true value. He is the host of the Impact Pricing podcast, helping people win more business at higher prices through value, and has authored three books which all revolve around pricing.
Ron Baker is the Founder of VeraSage Institute, dedicated to helping professional knowledge firms bury the billable hour and trash timesheets. He has published seven books around the topics of business and pricing, and also is a radio talk-show host for The Soul of Enterprise.
In this episode, Ron engages in a pricing metric discussion with Mark as they share their insights on cost-plus, hourly pricing, and subscriptions.
Why you have to check out today’s podcast:
- Deep dive into discussions about different pricing metrics, focusing on cost-plus, hourly, and subscriptions
- Find out why putting time in your service and charging by the hour isn’t an ideal way to charge clients
- Understand why providing value is better than charging hourly or using cost-plus pricing
“There's always going to be people and businesses that use cost-plus and other inferior methods like hourly. They're going to be out there, but they're just not where my focus is. My focus is on the other end, trying to help people price and create more value so they can capture more value. I'm not interested in working for people that want to price in an inferior manner, because I think that means they're not providing enough value to you.”
– Ron Baker
Topics Covered:
01:17 – Mark’s five top reasons/times when cost-plus pricing makes sense
04:36 – Reacting to Mark’s five reasons / doing value-based pricing along with cost-plus pricing
08:13 – Pricing in micro and macro level businesses: cost-plus vs value-based
11:37 – Why Ron refuses to pay by hourly billing + how auto mechanics price their work
16:24 – Talking about Ron and Colin’s difference in perspectives
18:04 – How Mark charges clients ‘hourly’ and what Ron has to say about it
23:04 – Discussion around subscription + today’s topic in general: pricing metric
27:25 – Mark’s tax guy + why hourly billing isn’t ideal for Ron
31:17 – On announcing a price increase: Do something nice for your customers
Key Takeaways:
“If I could categorize everything I just said, I'd categorize it in two categories. One is sometimes, customers demand it – so that would be Apple and government, and sometimes, it's just more efficient as a business to do cost plus than it is to do value-based pricing.” – Mark Stiving
“In the world of cost plus and efficiencies, one could make the argument. I'm not saying this is true by any means, but one could make the argument. If I was in a very low margin, highly competitive business, it might be less expensive and more efficient to just do cost plus than to spend time trying to figure out what each customer's willing to pay me.” – Mark Stiving
“One of my favorite sayings is customers hate price increases, but they'll hate it a little bit less if you blame increasing costs.” – Mark Stiving
“The billable hour is what I'm crusading against, but on a larger perspective, the billable hour is cost-plus pricing.” – Ron Baker
“At a macro level, there's no way that costs justify price or determine price. Can't be. Otherwise, no business would ever go bankrupt.” – Ron Baker
“If somebody really did abuse you, then why would you ever work with that person?” – Ron Baker
People / Resources Mentioned:
- The Soul of Enterprise:https://www.thesoulofenterprise.com/
- Colin Jasper:https://www.linkedin.com/in/colin-jasper-7a401213/
- Win Keep Grow:https://www.amazon.com/Win-Keep-Grow-Accelerate-Subscription/dp/1631954784
- Time’s Up:https://www.amazon.com/Times-Up-Subscription-Business-Professional/dp/1119893526
- Marco Bertini:https://marcobertini.com/
- The Ends Game:https://marcobertini.com/book/
Connect with Ron Baker:
Connect with Mark Stiving:
- LinkedIn:https://www.linkedin.com/in/stiving/
- Email: mark@impactpricing.com